Max E.Mon, Jan 10, 2022 1:00 PM
Bitcoin (BTC): 10 January Price Digest
On Saturday, the six-day series of BTC failures was finally interrupted, and this asset was able to fix above the support level of $40 thousand. If BTC can overcome resistance at around $43K, then the rest of the crypto market is likely to get a breath of fresh air and recovery rallies will begin in all directions. However, if the breakout does not occur, then further corrections may begin, and BTC will begin to test the level of $41.8 thousand.
In addition, the plans of the US Federal Reserve Commission to accelerate the growth of interest rates will come into effect in March, which means that the prospects for BTC growth in the short term remain rather modest against the backdrop of this policy.
On December 14-15, the Fed postponed the deadline for the final winding-up of the asset repurchase program from June to March. The updated forecasts assume three increases in the key rate over the next two years. The previous one in September allowed only one increase in 2022 and two – in 2023. Analysts express fears that a reduction in the Fed's balance sheet will provoke a bear market. The reason lies in the decision to reduce liquidity in the face of the rate hike.
For digital assets, “quantitative tightening” can be challenging as they are at the far end of the risk curve. In the same way that they have benefited from extremely loose monetary policy, cryptocurrencies may come under pressure from their unexpectedly tight nature as capital flows into safe asset classes. Bitcoin serves as an indicator of the state of liquidity in the financial system. As it decreases, macroeconomic-oriented players sell Bitcoin, followed by other cryptocurrencies.
Experts admit the possibility of a rebound in Bitcoin in the range of $41,000- $44,000 before the publication of the inflation report on Wednesday. The nature of the data will determine the further course of events. Everything will depend on the dynamics of consumer prices, which at some stage will take on a downward trend. This will be facilitated by the impact of monetary tightening, the resolution of supply chain problems and the dominance of deflationary forces over the long term.
The market situation can only be changed by a large injection of money. But according to the Weekly Crypto Asset Flows chart, such massive injections of funds are unlikely to be expected. The numbers of asset inflows have been in negative numbers for several weeks now, and the new funding will take time to push BTC to the upside.
In the meantime, extreme fear reigns in the market – on January 8, 2022, the Fear & Greed indicator recorded a value of 10, which was previously noted extremely rarely.
On Monday, January 10, the price of the first cryptocurrency dropped below $ 40,000. The fall in the last 24 hours was 4%, according to CoinGecko.
Altcoins, by the way, are doing better. The recovery rate of most L1 tokens is higher than that of BTC, and some large protocols have even recorded 5-7% growth in the last 24 hours. ETH has also bounced back from a weekly decline and, despite low spot trading volumes, is about to start testing resistance at $3,200. BTC's dominance by market cap continues to wane, so it looks like it's time for altcoins.